1.

Discuss the goal of a supply chain and explain the impact of supply
chain decisions on
the success of a firm. The goal of a supply chain should be to grow overall
supply chain surplus.
Supply chain surplus is the difference between the value generated for the
customer and the total
cost incurred across all stages of the supply chain. A focus on the supply chain
surplus increases
the size of the overall pie for all members of the supply chain. Supply chain
decisions have a large
impact on the success or failure of each firm because they significantly influence
both the revenue
generated and the cost incurred. Successful supply chains manage flows of
product, information,
and funds to provide a high level of product availability to the customer while
keeping costs low.
2. Identify the three key supply chain decision phases and explain the
significance of
each one. Supply chain decisions may be characterized as strategic (design),
planning, or operational,
depending on the time period during which they apply. Strategic decisions relate
to supply
chain configuration. These decisions have a long-term impact that lasts for
several years.
Planning decisions cover a period of a few months to a year and include decisions
regarding
production plans, subcontracting, and promotions over that period. Operational
decisions span
from minutes to days and include sequencing production and filling specific
orders. Strategic
decisions define the constraints for planning decisions, and planning decisions
define the constraints
for operational decisions.
3. Describe the cycle and push/pull views of a supply chain. The cycle
view divides processes
into cycles, each performed at the interface between two successive stages of a
supply chain.
Each cycle starts with an order placed by one stage of the supply chain and ends
when the order is

1
received from the supplier stage. A push/pull view of a supply chain characterizes
processes based
on their timing relative to that of a customer order. Pull processes are performed
in response to a
customer order, whereas push processes are performed in anticipation of
customer orders.
4. Classify the supply chain macro processes in a firm. All supply chain
processes can
be classified into three macro processes based on whether they are at the
customer or supplier
interface or are internal to the firm. The CRM macro process consists of all
processes at the interface
between the firm and the customer that work to generate, receive, and track
customer orders.
The ISCM macro process consists of all supply chain processes that are internal to
the firm and
work to plan for and fulfill customer orders. The SRM macro process consists of all
supply chain
processes at the interface between the firm and its suppliers that work to
evaluate and select suppliers
and then source goods and services from them.
1. Explain why achieving strategic fit is critical to a companys overall
success. A lack of
strategic fit between the competitive and supply chain strategies can result in the
supply chain taking
actions that are not consistent with customer needs, leading to a reduction in
supply chain surplus
and decreasing supply chain profitability. Strategic fit requires that all functions
within a firm
and stages in the supply chain target the same goalone that is consistent with
customer needs.
2. Describe how a company achieves strategic fit between its supply
chain strategy and
its competitive strategy. To achieve strategic fit, a company must first
understand the needs of
the customers being served, understand the uncertainty of the supply chain, and
identify the
implied uncertainty. The second step is to understand the supply chains
capabilities in terms of

2
efficiency and responsiveness. The key to strategic fit is ensuring that supply
chain responsiveness
is consistent with customer needs, supply capabilities, and the resulting implied
uncertainty.
Tailoring the supply chain is essential to achieving strategic fit when supplying a
wide variety of
customers with many products through different channels.
3. Discuss the importance of expanding the scope of strategic fit across
the supply
chain. The scope of strategic fit refers to the functions and stages within a
supply chain that
coordinate strategy and target a common goal. When the scope is narrow,
individual functions try
to optimize their performance based on their own goals. This practice often
results in conflicting
actions that reduce the supply chain surplus. As the scope of strategic fit is
enlarged to include
the entire supply chain, actions are evaluated based on their impact on overall
supply chain performance,
which helps increase supply chain surplus.
4. Describe the major challenges that must be overcome to manage a
supply chain successfully.
Globalization, increasing product variety, decreasing product life cycles,
fragmentation
of supply chains, changing technologies, and an increased focus on sustainability
represent
significant challenges to achieving strategic fit. They also represent great
opportunities for firms
that can successfully address these challenges with their supply chain strategies.

1. Describe key financial measures of firm performance. The key financial

measures
of firm performance include return on equity; return on assets; accounts payable
turnover; profit

3
margin; asset turnover and accounts receivable turnover; inventory turns;
property, plant, and
equipment turns; and cash-to-cash cycle.

2. Identify the major drivers of supply chain performance. The major

drivers of supply
chain performance are facilities, inventory, transportation, information, sourcing,
and pricing.

3. Discuss the role of each driver in creating strategic fit between the
supply chain
strategy and the competitive strategy. A company achieving strategic fit has
found the
right balance between responsiveness and efficiency. Each driver affects this
balance. Having
more facilities generally makes a chain more responsive, whereas having fewer,
central
facilities creates higher efficiency. Holding higher levels of inventory increases
the responsiveness
of a supply chain, whereas keeping inventory low increases the chains efficiency.
Using faster modes of transportation increases a chains responsiveness, whereas
using
slower modes generally increases efficiency. Investing in information can vastly
improve
the supply chain performance on both dimensions. This investment, however,
must be made
based on the strategic position supported by the other drivers. Appropriate
sourcing decisions
raise supply chain profits by assigning supply chain functions to the right party,
which brings higher economies of scale or a higher level of aggregation of
uncertainty.
Pricing can be used to attract the right target customer segment. Differential
pricing can be
used to attract customers who value responsiveness as well as customers who
want efficiency.
The supply chain can then be structured to provide responsiveness to some
customers
while improving overall efficiency.

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4. Define the key metrics that track the performance of the supply chain
in terms
of each driver. Facility-related metrics are capacity, utilization, theoretical
flow/cycle
time of production, actual flow/cycle time, flow time efficiency, product variety,
volume
contribution of top 20 percent SKUs/customers, processing/setup/down/idle time,
and
average production batch size. Inventory-related metrics are average inventory,
products
with more than a specified number of days of inventory, average replenishment
batch size,
average safety inventory, seasonal inventory, fill rate, and fraction of time out of
stock.
Transportation-related metrics are average inbound transportation cost, average
incoming
shipment size, average inbound transportation cost per shipment, average
outbound transportation
cost, average outbound shipment size, average outbound transportation cost per
shipment, and fraction transported by mode. Information-related metrics are
forecast horizon,
forecast error, seasonal factors, variance from plan, and ratio of demand
variability to
order variability. Sourcing-related metrics are days payable outstanding, average
purchase
price, range of purchase price, average purchase quantity, fraction on-time
deliveries, supply
quality, and supply lead time. Pricing-related metrics are profit margin, days sales
outstanding, incremental fixed cost per order, incremental variable cost per unit,
average

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sale price, average order size, range of sale price, and range of periodic sales.
Each of
these metrics directly or indirectly affects the financial metrics and the
responsiveness to
customers.

1. Identify the key factors to be considered when designing a

distribution network. A
manager must consider the customer needs to be met and the cost of meeting
these needs when
designing the distribution network. Some key customer needs to be considered
include response
time, product variety/availability, convenience, order visibility, and returnability.
Important costs
that managers must consider include inventories, transportation, facilities and
handling, and
information. Increasing the number of facilities decreases the response time and
transportation
cost but increases inventory and facility cost.
2. Discuss the strengths and weaknesses of various distribution
options. Distribution
networks that ship directly to the customer are better suited for a large variety of
high-value
products that have low and uncertain demand. These networks carry low levels of
inventory but

6
incur high transportation cost and provide a slow response time. Distribution
networks that carry
local inventory are suitable for products with high demand, especially if
transportation is a large
fraction of total cost. These networks incur higher inventory cost but lower
transportation cost
and provide a faster response time.
3. Understand how online sales have affected the design of distribution
networks in different
industries. The rise of online sales has affected both customer service and costs
in supply
chains. Online sales allow a firm to offer greater product variety and improve
product
availability by centralizing inventories. This is especially beneficial for low-
volume, high-variety
products. The online channel also improves the customer experience by providing
24-hour access
and allowing a more customized experience. Selling a product online, however,
increases the
response time relative to a retail store. A company selling online reduces facility
costs if there is
no significant loss of customer participation. Transportation costs increase,
however; this is particularly
significant for low-value products with predictable demand. Online sales have
been
most effective for high-value products with uncertain demand, when customers
are willing to
wait some time before delivery. The Internet is particularly effective for products
such as music,
movies, and books that can be digitized because the two major disadvantages of
distributing
physical products onlinelong response times and high transportation cost
disappear.

1. Understand the role of network design in a supply chain. Network

design decisions

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include identifying facility roles, locations, and capacities and allocating markets
to be
served by different facilities. These decisions define the physical constraints
within which the
network must be operated as market conditions change. Good network design
decisions increase
supply chain profits.
2. Identify factors influencing supply chain network design decisions.
Broadly
speaking, network design decisions are influenced by strategic, technological,
macroeconomic,
political, infrastructure, competitive, and operational factors.
3. Develop a framework for making network design decisions. The goal of
network
design is to maximize the supply chains long-term profitability. The process
starts by defining the
supply chain strategy, which must be aligned with the competitive strategy of the
firm. The supply
chain strategy, regional demand, costs, infrastructure, and competitive
environment are used to define
a regional facility configuration. For regions where facilities are to be located,
potentially attractive
sites are then selected based on available infrastructure. The optimal
configuration is determined from
the potential sites using demand, logistics cost, factor costs, taxes, and margins
in different markets.
4. Use optimization for facility location and capacity allocation
decisions. Gravity
location models identify a location that minimizes inbound and outbound
transportation costs.
They are simple to implement but do not account for other important costs.
Network optimization
models can include contribution margins, taxes, tariffs, production,
transportation, and
inventory costs and are used to maximize profitability. These models are useful
when locating
facilities, allocating capacity to facilities, and allocating markets to facilities.